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Ruling gives CRA access to eBay client records held outside Canada

|Written By Kelly Harris
Ruling gives CRA access to eBay client records held outside Canada

A unanimous ruling by the Federal Court of Appeal in eBay Canada Ltd. Et al. v. Minister of National Revenue released Nov. 7 could have sweeping implications for any company doing business in Canada that holds records outside the country, regardless of whether the company itself holds the information. 


Clients of the eBay global online marketplace that reach a certain high-volume amount of monthly sales are referred to as “PowerSellers” and are required by the eBay group of companies to provide personal information that is held confidentially in the United States. This information is readily available to eBay Canada through a secured online network.

In an October 2006 ruling, Justice Roger Hughes of the Federal Court granted the minister of Revenue the right to access eBay’s “PowerSeller” records under s. 231.2(2) of the Income Tax Act. The section allows the minister to seek a judicial order to compel a company to produce information relating to an unnamed person, in the case of the “PowerSellers.”

eBay Canada appealed the ruling on the basis that the information about unnamed persons was held by another company outside Canada and should not be compelled to produce the records. However, the Federal Court of Appeal dismissed eBay Canada’s claim saying the information was readily accessible by the company and used for everyday business, so therefore it was not an imposition on the company to produce it.

“In my view, Justice Hughes made no reversible error in concluding on the facts before him that the information sought was not ‘foreign-based information’; even though stored on servers outside Canada, it was also located in Canada because of its ready accessibility to and use by the appellants. Consequently, it was open to the Minister to seek its production by a requirement imposed on the appellants under [s.] 231.2, without regard to any possible limitations on those powers flowing from the presence of [s.] 231.6. Since the Judge properly authorized the imposition of the requirement under [s.] 231.2, I would dismiss the appeal,” wrote Justice John Maxwell Evans in the reasons for judgement.

Lang Michener LLP IP lawyer Peter Wells says he “wouldn’t be a bit surprised” if eBay Canada appealed the ruling to the Supreme Court of Canada. However, the mere fact that the court was not moved by the objection that the records were held outside the country could have significant implications for groups doing business in Canada.

“What it does tell you is . . . if you are going to do business in Canada and not report all your revenue and income to the [Canadian Revenue Agency], you should worry if you are doing online transactions,” Wells says

The greater issue, Wells says, is that there is still a perception that online equals anonymous. However, he says that the rule for doing anything online is that the information can be traced and that information, in the case of eBay Canada, can end up in the hands of the CRA or other government bodies.

“Don’t do anything online that you wouldn’t want the government looking over your shoulder while you are doing it,” he says.

For the full ruling, click here.